- 21 -
Second, eligibility for relief under section 530(a)(1)
requires that the taxpayer have a reasonable basis for not
treating the service provider in question as an employee. This
requirement may be established by the particular facts and
circumstances of the case or by reference to one of the three
“safe harbors” described in section 530(a)(2).
We recognize that the Congress intended that “this
reasonable basis requirement be construed liberally in favor of
taxpayers.” H. Rept. 95-1748, 1978-3 C.B. (Vol. 1) 629, 633.
However, it has been held that an S corporation’s treatment of
its president as a shareholder, rather than as an employee, was
unreasonable within the meaning of section 530 where the
president “was, for all practical purposes, the central worker
for the taxpayer.” Spicer Accounting, Inc. v. United States, 918
F.2d 90, 95 (9th Cir. 1990). There the Court of Appeals
concluded that “it is clear that Mr. Spicer failed to satisfy
this [reasonable basis] standard, however liberally construed.”
Id. Similarly, because Mr. Barron was “the central worker” for
petitioner and provided substantial services, and further because
sections 3121(d)(1) and 3306(i) unambiguously state that a
corporate officer is an employee, we conclude that petitioner’s
treatment of Mr. Barron was unreasonable.
Petitioner relies on Durando v. United States, 70 F.3d 548
(9th Cir. 1995), in support of its treatment of Mr. Barron. That
Page: Previous 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 NextLast modified: May 25, 2011